Individual 529 vs Custodial (UTMA/UGMA) 529

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markcoop
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Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Thu Jan 18, 2018 10:52 am

I am trying to figure out whether to transfer part of my parent owned Individual 529 to a child owned Custodial 529 (AKA UTMA/UGMA 529).

Situation: I have one child (child 1) that attends a college that uses the Profile and meets full need. He is currently receiving a nice grant. I have another child (child 2) who is a freshman in high school. I have a parent owned Individual 529 account that I use for both children (trivial to transfer money from one beneficiary to another). The 529 account is listed as a parent asset when I complete the financial aid forms (FAFSA and Profile) for child 1. I have saved about $120K per child in this 529 plan (BTW - I was amazed we did receive a nice grant from the school but that seems to be the new pricing model. It was a factor in us picking that school as it would have been too expensive otherwise).

Plan: Take a safe portion of child 2's 529 money and move it into a child owned Custodial 529. I recently learned that Custodial 529 accounts belonging to child 2 would not be listed as a parent asset when completing financial aid forms for child 1. If I did this for $100K, I am estimating that it would increase aid by about $5K/yr according to formulas I have seen.

Positives: Getting more aid money

Negatives: 1) The money will belong to the child. I really do not have a big concern about that but do understand it's a small risk the child decides to cash it in and do whatever. 2) I hope the school for kid 2 will consider a student-owned 529 account to be a parent asset but you never know. 3) Ethically, it feels wrong to shift money to get more aid.

At this point I'm trying to see if there are any other negatives. Thoughts?

Thanks
Mark

Spirit Rider
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Spirit Rider » Thu Jan 18, 2018 2:48 pm

You learned this from who? and on what financial aid forms?

A UTMA 529 is also most definitely considered a parental asset for FSFSA purposes. I can't say for sure, but I have never run into a school even ones using the CSS profile treating a UTMA 529 as a student asset.

I wonder is someone isn't confused and/or misinformed. They quite likely are conflating the treatment of UTMA 529s with that of taxable UTMA accounts. Even third party (grandparent, etc...) 529s are not considered assets of the student. It is the actual use that is treated as non-taxable income to the student.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Thu Jan 18, 2018 3:46 pm

Spirit Rider wrote:
Thu Jan 18, 2018 2:48 pm
You learned this from who? and on what financial aid forms?
I originally got the idea from the College Confidential web board. I am not sure how to get a copy of the current instructions for the Profile (even though I recently submitted it). But here are some sources:

https://finaidonline.collegeboard.com/f ... e_faqs.pdf

"How is a UGMA/UTMA account different from a 529 savings plan?
In the 529 savings plan, the owner establishes the account and designates a beneficiary. The value
and legal control of the account remain with the owner. Therefore, the 529 savings plan is the legal
asset of the owner, usually a parent, and should be reported as a parent asset in Section PA if
owned by the parent. The student is both beneficiary and owner of the UGMA/UTMA account,
regardless of the origin of the funds. Because the student owns the account, the present value of
the plan must be declared as a student asset in Section SA."

and

"Since these plans represent an asset they must be reported as such on the PROFILE if the parent
is the owner of the plan established for the student or the student's brothers or sisters."

It specifically says to include a 529 plan as a parent asset if owned by the parent. A custodial 529 plan is not owned by the parent. I know the FAFSA instructions are different.

I did find a reference in a Savingsforcollege.com thread that did have the directions for the student asset:
https://forum.savingforcollege.com/t/52 ... -css/10845

"SA-110A Use the worksheet to answer how much your (and your spouse's, if married) investments are worth today. Do not include the value of your home, other real estate, business, or farm. If you, the student, own one or more of those assets, report the value in SA-120 - home, SA-140 - other real estate, and SA-150 - business and/or farm. If you are required to provide parent data, assets that are held in Section 529 prepaid tuition or college savings plans or Coverdell savings accounts should be listed as parent assets in PA-120. If parent data are not required, report these assets here. If you (and your spouse) have assets owned jointly with someone else, give only your (and your spouse's) portion of the assets. If you have a 529 plan as part of a Uniform Gift to Minors Act (UGMA) account or Uniform Transfer to Minors Act (UTMA) account or that was funded from assets from an UGMA/UTMA, it is considered a student asset and should be reported here. Only enter your assets in this question; don't include your parents' assets."

This is from Dec 2010, so it is possible the treatment has changed. It does clearly state that UGMA/UTMA 529 plans is considered a student asset.

There are 2 points in my post:
1) Custodial 529s (owned by a child) are not reported on the financial aid forms (FAFSA or Profile) of a sibling. Do you agree with that? Because most of my question has to do with that.

2) Where are Custodial 529s (owned by a child) reported on the CSS Profile - Parent asset or child asset. From the quotes above, I believe it is in the student assets. However, as I also read, many colleges who use the Profile follow the FAFSA lead and treat it as a parent asset. But that is only if you tell them about it (in the explanation section or some other way).
Mark

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Spirit Rider » Thu Jan 18, 2018 4:01 pm

A UTMA 529 is clearly considered a parental asset for FAFSA purposes. I do not remember where it was reported on the Profile. Your description indicates it should be listed as a student asset.

Regardless, in no case is it not reported on one or the other. So your basic idea of getting more aid is not going to happen.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Thu Jan 18, 2018 4:14 pm

Spirit Rider wrote:
Thu Jan 18, 2018 4:01 pm
Regardless, in no case is it not reported on one or the other. So your basic idea of getting more aid is not going to happen.
I am not sure why you believe that to be the case. If a younger sibling has a UGMA 529 account, then it would not go on financial aid forms of the older sibling (FAFSA or Profile). However, if I own the 529 account with my kids as the beneficiary, then the 529 assets for the younger child is included in financial aid forms of the older sibling. Clearly, if this is true, the EFC would change.
Mark

DIFAR31
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Thu Jan 18, 2018 5:05 pm

markcoop wrote:
Thu Jan 18, 2018 4:14 pm
If a younger sibling has a UGMA 529 account, then it would not go on financial aid forms of the older sibling (FAFSA or Profile). However, if I own the 529 account with my kids as the beneficiary, then the 529 assets for the younger child is included in financial aid forms of the older sibling. Clearly, if this is true, the EFC would change.
This interpretation is correct.

I hope the school for kid 2 will consider a student-owned 529 account to be a parent asset but you never know.
Contact the school's financial aid office and ask how they treat a student-owned 529 account (student asset or parent asset). They will probably tell you, and then you will know.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Thu Jan 18, 2018 5:43 pm

DIFAR31 wrote:
Thu Jan 18, 2018 5:05 pm
Contact the school's financial aid office and ask how they treat a student-owned 529 account (student asset or parent asset). They will probably tell you, and then you will know.
Thanks for your reply. I guess there are two issues if I convert child 2's 529 to an UGMA 529:

1) Child 1 - I believe it reduces the parent's assets on child 1's financial aid forms. That will lower the EFC and therefore potentially increase grants.

2) Child 2 - Depending on the school, I believe it will convert money from a parent asset to a child asset? That is what I don't know since child 2 is only in high school and I don't have a financial aid office to contact. If it does, that will raise the EFC (child's assets count more) and therefore potentially decrease any potential grants.
Mark

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Fri Jan 19, 2018 9:47 am

I am actually surprised that more people have not talked about this issue. It always seemed wrong to me that I saved for my 3 kids in college and the money earmarked for one sibling affects the other siblings. I believe I found here a way for that not to be the case. The affect could be in the thousands per year.
Mark

bearcat98
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by bearcat98 » Fri Jan 19, 2018 2:22 pm

markcoop wrote:
Thu Jan 18, 2018 5:43 pm
2) Child 2 - Depending on the school, I believe it will convert money from a parent asset to a child asset? That is what I don't know since child 2 is only in high school and I don't have a financial aid office to contact. If it does, that will raise the EFC (child's assets count more) and therefore potentially decrease any potential grants.
I think this is correct. https://www.reuters.com/article/us-colu ... LZ20130429

DIFAR31
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Fri Jan 19, 2018 4:21 pm

bearcat98 wrote:
Fri Jan 19, 2018 2:22 pm
markcoop wrote:
Thu Jan 18, 2018 5:43 pm
2) Child 2 - Depending on the school, I believe it will convert money from a parent asset to a child asset? That is what I don't know since child 2 is only in high school and I don't have a financial aid office to contact. If it does, that will raise the EFC (child's assets count more) and therefore potentially decrease any potential grants.
I think this is correct. https://www.reuters.com/article/us-colu ... LZ20130429
The linked Reuters article is almost five years old, and as a result it is inaccurate because of changes that have taken place in the ways that need-based financial aid is calculated. Significantly, income information is now used from the prior-prior year (two years back), instead of the prior year. For example, for the current 2017-2018 academic/FAFSA/CSS Profile year, the base income year for determining aid is tax year 2015. For those now completing the 2018-2019 forms, the base year is tax year 2016. This change means that money the student receives from a grandparent 529 account (or any other 529 account not owned by the student or a reporting parent) will have zero effect on financial aid awards, if the use of this account can be delayed until spring of the sophomore year and assuming that the student will graduate in the spring of senior year after progressing normally through four academic years.

As pointed out above, how child 2's student-owned 529 account is treated by a CSS Profile school depends on that schools' specific policies. If having the money in such an account treated as a student asset instead of a parent asset will be a major issue, it would be a smart move to determine school policies before the student narrows down the list of schools to which applications will be sent.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Fri Jan 19, 2018 5:10 pm

DIFAR31 wrote:
Fri Jan 19, 2018 4:21 pm
As pointed out above, how child 2's student-owned 529 account is treated by a CSS Profile school depends on that schools' specific policies. If having the money in such an account treated as a student asset instead of a parent asset will be a major issue, it would be a smart move to determine school policies before the student narrows down the list of schools to which applications will be sent.
And not knowing what school a younger child will be attending, let alone if it will be a Profile school that treats a custodial 529 as a child asset, makes this decision a tough one.

To summarize the pros and cons of converting a younger siblings parent owned 529 to a custodial 529 when the older child is currently receiving aid:

Pros:
Most likely (I would say definitely at a school the meets full need) increase current financial aid of older child by removing large sum of money from parents assets.

Negatives:
1) The money will belong to the child at 21 (or 18 depending on your state).
2) Asset could hurt younger child aid package by treating converted amount as a child asset instead of a parent asset.
3) Still not totally comfortable shifting money to get more aid.
4) I believe you are subject to gift tax limits if converting the money, being that the child becomes the owner. Anyone know if this is true?
5) A hassle to do the conversion. I called NY's plan and would need to open a new account and get a signature guarantee on the paperwork to transfer ownership.
6) I have never taken money out of a custodial 529. I currently just have the money deposited into my bank account and pay the school myself. I imagine there would be some other steps involved if the child owns the money.

Yes, more negatives than positives. However, for $100K account, it could increase the older siblings aid package over 4 years by about $20K.

Other negatives???
Mark

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Fri Jan 19, 2018 5:44 pm

1) The money will belong to the child at 21 (or 18 depending on your state).
In my mind, this is potentially the biggest negative. It depends on how well you know your kid, but giving up control can be a hard choice to make.
2) Asset could hurt younger child aid package by treating converted amount as a child asset instead of a parent asset.
Yes, but as noted, this problem can be avoided by doing some easy research. Of course, it may also dissuade an application to a school that would otherwise be a top choice.
3) Still not totally comfortable shifting money to get more aid.
There are all sorts of maneuvers that can be made to increase need-based aid; I personally don't see this one as that big a deal. This risk in giving up control of the money is not insignificant, even when compared to the possible benefit.
4) I believe you are subject to gift tax limits if converting the money, being that the child becomes the owner. Anyone know if this is true?
The money in the account is already treated as having been gifted to the beneficiary. I'm not sure that changing ownership of the account to the current beneficiary has any gift tax implications.
5) A hassle to do the conversion. I called NY's plan and would need to open a new account and get a signature guarantee on the paperwork to transfer ownership.
Certainly, it's not as simple as spending several minutes online and making a few clicks. How much hassle can $20k pay for?
6) I have never taken money out of a custodial 529. I currently just have the money deposited into my bank account and pay the school myself. I imagine there would be some other steps involved if the child owns the money.
I have been a custodian for a student-owned 529 account. Taking distributions was as easy as calling the plan administrator and requesting an ACH transfer to a checking account in the student's name. This typically took two business days. The student then wrote the checks to the college to pay the bills, which imparted a true understanding of how much the education was costing. This is an experience which would have made me a more serious student.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Fri Jan 19, 2018 8:15 pm

Thank you very much for that reply. It was very helpful. Do you know what happens if you don't use the money in a custodial 529? In a parent owned 529, I can always change the beneficiary to another child or maybe even a grandchild someday. I would guess in a custodial 529, when the child becomes the age of majority, he'd be able to change the beneficiary to one of his siblings (maybe in grad school) or one of his future children. True?
Mark

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Spirit Rider » Fri Jan 19, 2018 8:29 pm

While a custodian of a UTMA 529 account can never change the beneficiary or rollover assets to a new beneficiary's account.

The owner of a custodial account has full control over their account after the age of and custodial termination. They can do anything a parental or third party can with an account including fully liquidating it or changing or rolling over to a new benficiary.

DIFAR31
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Fri Jan 19, 2018 8:34 pm

markcoop wrote:
Fri Jan 19, 2018 8:15 pm
Thank you very much for that reply. It was very helpful. Do you know what happens if you don't use the money in a custodial 529? In a parent owned 529, I can always change the beneficiary to another child or maybe even a grandchild someday. I would guess in a custodial 529, when the child becomes the age of majority, he'd be able to change the beneficiary to one of his siblings (maybe in grad school) or one of his future children. True?
If the money in a custodial (UTMA/UGMA) 529 account isn't used, then it just sits there. When the custodian still has control, the account could be used for non-qualified expenses for the benefit of the account owner/beneficiary, but in such a case earnings would be subject to tax and possibly the 10% additional tax. Once the account owner reaches the age of majority and takes control, the same tax rules apply for non-qualified distributions, but the account owner would have full discretion as to how the money is spent, including gifts to a sibling (or anyone else, for that matter). I'm not sure if at this point the beneficiary could be changed; and whether or not it could may be dependent on the policies of the particular plan.

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Fri Jan 19, 2018 8:53 pm

Thanks again for all the insight. At this point I think I'm going to do it. However, I have a few months to really decide because I already submitted the Profile application for my son who is in college for 2018/19. I actually will only get 2 years of benefit and probably won't do it for the whole $100K, but I still think it will be worth it.
Mark

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Sammy_M
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Sammy_M » Sat Jan 20, 2018 9:30 am

DIFAR31 wrote:
Fri Jan 19, 2018 4:21 pm
As pointed out above, how child 2's student-owned 529 account is treated by a CSS Profile school depends on that schools' specific policies. If having the money in such an account treated as a student asset instead of a parent asset will be a major issue, it would be a smart move to determine school policies before the student narrows down the list of schools to which applications will be sent.
I may have missed this in the discussion, but how is a custodial 529 account treated in FAFSA if the custodian is not the parent?

I've funded custodial accounts for nieces and nephews. They may be eligible for financial aid. Would it make sense to convert to custodial 529? Would the money be treated as an asset of mine for my own kids' FAFSA application? Or not reported at all? Is it like a grandparent owned 529 where it would not count until withdrawn and then counted as student income, and thus best for them to use in junior or senior year?

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Sammy_M » Sat Jan 20, 2018 9:42 am

markcoop wrote:
Fri Jan 19, 2018 9:47 am
I am actually surprised that more people have not talked about this issue. It always seemed wrong to me that I saved for my 3 kids in college and the money earmarked for one sibling affects the other siblings. I believe I found here a way for that not to be the case. The affect could be in the thousands per year.
That is only applicable to CSS, correct? In FAFSA, custodial 529s are treated as the asset of the custodian-parent.

DIFAR31
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Sat Jan 20, 2018 10:48 am

Sammy_M wrote:
Sat Jan 20, 2018 9:30 am
I may have missed this in the discussion, but how is a custodial 529 account treated in FAFSA if the custodian is not the parent?
On FAFSA, a 529 account owned by the student is reported as a parent asset. It doesn't matter who the custodian is.
I've funded custodial accounts for nieces and nephews. They may be eligible for financial aid. Would it make sense to convert to custodial 529? Would the money be treated as an asset of mine for my own kids' FAFSA application? Or not reported at all? Is it like a grandparent owned 529 where it would not count until withdrawn and then counted as student income, and thus best for them to use in junior or senior year?
A regular UTMA/UGMA account will be reported on FAFSA and Profile as an asset of the student beneficiary/account owner. In general, on FAFSA this would be about a 20% hit on financial aid. Profile schools have their own formulas, but it's a good bet that a student asset on Profile will get assessed at a greater rate than a parent asset. If a regular UTMA/UGMA account is converted to a custodial 529 (remember, 529s only accept cash, so the regular UTMA/UGMA would have to be liquidated first with all the tax implications), it would be reported on FAFSA as a parent asset that would be assessed at around 5.6%. Whether or not it would become a parent asset for Profile schools depends on the school policy.

DIFAR31
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Sat Jan 20, 2018 10:57 am

Sammy_M wrote:
Sat Jan 20, 2018 9:42 am
markcoop wrote:
Fri Jan 19, 2018 9:47 am
I am actually surprised that more people have not talked about this issue. It always seemed wrong to me that I saved for my 3 kids in college and the money earmarked for one sibling affects the other siblings. I believe I found here a way for that not to be the case. The affect could be in the thousands per year.
That is only applicable to CSS, correct? In FAFSA, custodial 529s are treated as the asset of the custodian-parent.
Mark is talking about the difference between parent-owned 529 accounts and student-owned 529 accounts and the impact on the reporting requirement and financial aid for a sibling. For both FAFSA and Profile, converting a 529 account where child A is the beneficiary from a parent-owned account to a student-owned account could have a positive impact on child B's financial aid, because after conversion the account will no longer need to be reported on child B's FAFSA or Profile.

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Sammy_M
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by Sammy_M » Sat Jan 20, 2018 11:55 am

DIFAR31 wrote:
Sat Jan 20, 2018 10:57 am
For both FAFSA and Profile, converting a 529 account where child A is the beneficiary from a parent-owned account to a student-owned account could have a positive impact on child B's financial aid, because after conversion the account will no longer need to be reported on child B's FAFSA or Profile.
I guess where I am confused is that earlier you said: On FAFSA, a 529 account owned by the student is reported as a parent asset.
Won't that parental asset (Child A's custodial 529) have to reported on Child B's FAFSA?

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by MrBeaver » Sat Jan 20, 2018 12:02 pm

I’ve been lurking here, but two quick questions which might affect how this applies to me in the future: (we have twins)

Is there any limitation to the amount of an account that can be converted from percent owned to student owned custodial 529? (For instance, if I wanted to do this while they were in high school after I felt confident in their handling of the money at 18 years old)

Would the financial aid benefit also benefit me with two children of the same age (in school at the same time)? It seems yes is the answer, but I don’t know how to square this with the dividing of the computed EFC by the number of children currently in college. That *seems* like double dipping to me to split out 529 money so each student only reports their own as a parent asset, but then divide the EFC computed from a single account value by two children to compute a final EFC.

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Sat Jan 20, 2018 12:23 pm

Sammy_M wrote:
Sat Jan 20, 2018 11:55 am
I guess where I am confused is that earlier you said: On FAFSA, a 529 account owned by the student is reported as a parent asset.
Won't that parental asset (Child A's custodial 529) have to reported on Child B's FAFSA?
No. Child A's custodial 529 account is only reported as a parent asset on child A's FAFSA. It's not really a parent asset; by rule it's being given preferential treatment on FAFSA. Since it's not really a parent asset and it's not child B's asset, it's not reported on child B's FAFSA (or Profile).

markcoop
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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Sat Jan 20, 2018 6:59 pm

DIFAR31 wrote:
Sat Jan 20, 2018 10:48 am
If a regular UTMA/UGMA account is converted to a custodial 529 (remember, 529s only accept cash, so the regular UTMA/UGMA would have to be liquidated first with all the tax implications), it would be reported on FAFSA as a parent asset that would be assessed at around 5.6%. Whether or not it would become a parent asset for Profile schools depends on the school policy.
The only point I would add is on the Profile, it is reported under the student assets (SA-110A). The directions are pretty clear. The only way the Profile school would even know it was a custodial 529 would be if you told them. There is an explanation section on the Profile where you could explain such a thing and you could always contact the school directly. On one hand I read more Profile schools are following the FAFSA lead and saying it is a parent asset. On the other hand, given how it is reported, my guess is that many schools just count it as a child asset. Of course, this is rally guess work unless you know the school and can ask directly.
Mark

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Sat Jan 20, 2018 7:54 pm

markcoop wrote:
Sat Jan 20, 2018 6:59 pm
DIFAR31 wrote:
Sat Jan 20, 2018 10:48 am
If a regular UTMA/UGMA account is converted to a custodial 529 (remember, 529s only accept cash, so the regular UTMA/UGMA would have to be liquidated first with all the tax implications), it would be reported on FAFSA as a parent asset that would be assessed at around 5.6%. Whether or not it would become a parent asset for Profile schools depends on the school policy.
The only point I would add is on the Profile, it is reported under the student assets (SA-110A). The directions are pretty clear. The only way the Profile school would even know it was a custodial 529 would be if you told them. There is an explanation section on the Profile where you could explain such a thing and you could always contact the school directly. On one hand I read more Profile schools are following the FAFSA lead and saying it is a parent asset. On the other hand, given how it is reported, my guess is that many schools just count it as a child asset. Of course, this is rally guess work unless you know the school and can ask directly.
Good points. On Profile, I did specifically mention in the explanation section at the end that $XX of the amount in SA-110 was held in a student-owned 529 account, and I followed up with the school to confirm their policy on counting this money as a parent asset. I was told that the school did indeed assess all student-owned 529 accounts as a parent asset, and that on future Profile submissions and for the purpose of conformity with FAFSA, student-owned 529 accounts should be reported in PA-120 (parent assets).

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by markcoop » Sun Jan 21, 2018 8:47 am

7trumpets wrote:
Sat Jan 20, 2018 12:02 pm
Is there any limitation to the amount of an account that can be converted from percent owned to student owned custodial 529? (For instance, if I wanted to do this while they were in high school after I felt confident in their handling of the money at 18 years old)
This is really a question for the individual plan. It is my understanding that not all plans allow you to convert from an individual 529 to a custodial 529. New York told me they do allow it.
7trumpets wrote:
Sat Jan 20, 2018 12:02 pm
Would the financial aid benefit also benefit me with two children of the same age (in school at the same time)? It seems yes is the answer, but I don’t know how to square this with the dividing of the computed EFC by the number of children currently in college. That *seems* like double dipping to me to split out 529 money so each student only reports their own as a parent asset, but then divide the EFC computed from a single account value by two children to compute a final EFC.
I think the answer is yes. Some money is owned by kid 1 and some by kid 2. All the rest of the money is split for EFC purposes. I agree that it is a bit odd you only count one kid's money for a particular application and then it gets split, but I don't make the rules. I am not certain how the formulas treat such money. Perhaps they don't split money owned by one kid???? Anyone know?
Mark

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Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by MrBeaver » Sun Jan 21, 2018 2:37 pm

markcoop wrote:
Sun Jan 21, 2018 8:47 am
7trumpets wrote:
Sat Jan 20, 2018 12:02 pm
Would the financial aid benefit also benefit me with two children of the same age (in school at the same time)? It seems yes is the answer, but I don’t know how to square this with the dividing of the computed EFC by the number of children currently in college. That *seems* like double dipping to me to split out 529 money so each student only reports their own as a parent asset, but then divide the EFC computed from a single account value by two children to compute a final EFC.
I think the answer is yes. Some money is owned by kid 1 and some by kid 2. All the rest of the money is split for EFC purposes. I agree that it is a bit odd you only count one kid's money for a particular application and then it gets split, but I don't make the rules. I am not certain how the formulas treat such money. Perhaps they don't split money owned by one kid???? Anyone know?
Ah, well my knowledge of the EFC computation details is pretty slim. I haven’t delved into this area as we have many years until it affects us. Who knows, maybe college will be ‘free’ by then ;)

But I *thought* the dividing of EFC for simultaneous students was done as a simple division after the EFC was computed. I could be wrong though.

DIFAR31
Posts: 124
Joined: Mon Jan 01, 2018 5:51 pm

Re: Individual 529 vs Custodial (UTMA/UGMA) 529

Post by DIFAR31 » Sun Jan 21, 2018 11:36 pm

7trumpets wrote:
Sun Jan 21, 2018 2:37 pm
But I *thought* the dividing of EFC for simultaneous students was done as a simple division after the EFC was computed. I could be wrong though.
The FAFSA EFC is unique to each individual student, even siblings living together with the same parents. This is because some of the components in determining the FAFSA (or any) EFC are student income and student assets. Schools that determine their own (non-FAFSA) EFC for the distribution of institutional money typically use their own formulas, so siblings going to different schools that use Profile would be even more likely to see disparities in their (non-FAFSA) EFCs, above and beyond the differences that would be introduced by having different income and asset numbers.

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